KPMG review shows up large differences

KPMG review shows up large differences

The nightmare of the farming year 2009 is fading into history. However, the legacy lives on in the form of wiped-out profits and, for many, higher debts on top of costs incurred in the farmyard pollution scheme.

2010 has been a dramatically different year. Milk price is up between 30% and 50%. Cows are milking far better, constituents are better and until this week's rainfall, the emerging problem was reduced grass growth because of a lack of rainfall.

On page 13, we give the official KPMG audited prices for milk going into manufacturing during the year. Milk going into the liquid market is excluded. The differences between the various buyers are significant. The KPMG audit is fundamentally different from the monthly league. The KPMG audit measures the amount paid for each litre of milk as delivered. It is not standardised or corrected for constituents or quality, so it represents precisely what the milk producer receives for each litre.

Our monthly milk leagues are entirely different and measure what is paid for the 'standardised gallon'. In other words, the milk that meets a number of clearly defined criteria - 3.3% protein, 3.6% fat, 400,000 SCC.

The primary objective of publishing these milk price comparisons is firstly to provide information to dairy farmers on how their prices compare with farmers elsewhere in the country. Of itself that is a valid reason. But there has to be more at stake than that.

The bulk of Irish milk is bought by co-operatives. We have seen throughout the dairy exporting world co-ops coming together to achieve greater efficiency in processing and marketing. We have seen clearly where this dilution of effort and concentration can lead to on the liquid milk side. The enhancement of retailer margin is horrifying.

Proportionately, we are by far the most dependent on dairy exports of all EU member states. Dairy farmers and others comparing prices are forced to ask themselves what precisely separates the top price of 24.11c/litre from the bottom price of 20.78c/litre, a difference of 3.3c/litre or over 15c/gallon.

While these basic questions arise, it is becoming clearer that we are looking at a significant increase in Irish milk output, especially if present prices last. Heifer calves are being retained which will come to full maturity just as milk quotas end in 2015. The possibility of the Irish national quota being exceeded in the meantime is very real.

We recognise that farmers are the owners of their own individual co-op businesses but the penalties of fragmentation are being exhibited in lower farmer returns stemming from a combination of higher than necessary costs and fratricidal competition on some markets. The necessary changes have to be driven by farmers themselves.